NARUC JOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONS BROADBAND OVER POWERLINES

1. NARUCJOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONSBROADBAND OVER POWERLINES

2. NARUCJOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONSBROADBAND OVER POWERLINESWade P. Malcolm, P.E.

3. Understanding Utility Responses to BPLFebruary 13, 2006NARUC Wade P. Malcolm, P.E. Vice President Power Delivery and Markets

4. Introduction • Broadband over powerline (BPL) technologies offer new opportunities for electric utilities to leverage their infrastructure for • Commercial broadband communication services • Utility applications • outage detection and management, • automated meter reading (AMR) • demand response programs

5. Background • BPL experience • Utility pilot programs • Deployments of commercial BPL services • State and federal regulators have encouraged expanding reach of broadband • Pace of utility BPL adoption slower than hoped • Regulators question how to encourage BPL deployments

6. Regulatory Interest in BPL • Regulatory interest in BPL has primarily been driven by three factors: • The desire for a “third wire” – a broadband alternative to cable and DSL providers that could introduce additional competition into the market; • The potential for BPL to extend broadband service to rural areas that are currently underserved; and • The potential for BPL to enable a more flexible, self-healing power grid that would be more robust in the face of either natural or man-made disasters, including terrorist attacks

7. Objectives and Approach • National Association of Regulatory Utility Commissions (NARUC) asked EPRI to help better understand utility responses to BPL • EPRI conducted • literature search • interviews with utilities • some who have embraced BPL • some not

8. Key Questions • Why some utilities embrace BPL while others are uninterested – even in the same regulatory environment? • Why some utilities focus primarily on internal applications of BPL (i.e., smart grid) and others view it primarily in terms of offering broadband communications services? • Do the benefits of BPL for internal utility applications in fact outweigh the costs?

9. Key References Cited • Clark Gellings and Karen George, Broadband Over Powerline 2004: Technology and Prospects. An EPRI white paper, 2004 • Karen George, BPL Market Update and Teleconference Highlights. A Primen Customer Insights Perspective (CI-PP-10), 2004 • Consumer Portal Telecommunications Technology Assessment (DRAFT, v2). EPRI, 2005 • BPL coverage in mainstream and industry press • BPL providers websites

10. Utilities Interviewed • Cinergy--Greg Wolf, VP, Cinergy Ventures • Largest commercial BPL deployment • Consumers Energy--Gerry Wyse, Manager of Distribution Planning and Performance • Commercial broadband pilot • South Central Indiana REMC--Kevin Sump, CEO • Commercial broadband deployment • Con Edison—Tim Frost, Director of Corporate Planning • BPL viewed as utility application • Central Hudson Gas & Electric —John Chrysler, R&D Administrator • Study led to conclusion not to pursue BPL • First Energy —EileenBuzzelli,Managing Director, New Products • Measured approach for piloting BPL

11. Characteristics of Enthusiastic BPL Utilities • Municipal utility status • They face fewer regulatory uncertainties • There is only one set of stakeholders– the municipality’s ratepayers/taxpayers/citizens • Geographically compact service territories that make deployments more cost-effective • Existing fiber networks that the utility can leverage such as those of Cinergy and PPL • Significant potential for broadband service growth • A successful history of offering services other than commodity electric power

12. Commercial Services vs. Utility Applications Commercial service • Strategic commitment to new services and technology investments by senior management • Unregulated subsidiary to pursue new opportunities • BPL service providers partnering with utilities and assuming risk Utility application • To stay close to their core business and “what they know”

13. Cost-Effectiveness of BPL for Utility Applications • High deployment cost • BPL ranked eighth of nine technologies for wide-area networks (WANs) in IntelliGrid architecture • Low marks on standardization and use of object modeling (tied to lack of technical maturity)

14. Utility Applications Criteria • Level of standardization • Ease of obtaining and using the technology • Current level of adoption • Degree of users’ group support • Security • Manageability • Scalability • Use of object modeling • Use of self-description or meta-data • Applicability to the power industry • Applicability to consumer services

15. Other Concerns With BPL • Lack of electrical current (power outage) disrupts some advanced IntelliGrid functions that wide-area networks would be intended to enable • Load shedding in an emergency situation with a finer degree of control than is currently possible, • Load redistribution by using demand response customers as a “fast reserve,” • Monitoring and controlling distributed generation at a customer’s site • Alternative technologies such as WiMAX, radio frequency, paging, or wireless communications could still be active in case of a power outage

16. Why Some Utilities Are Moving Slowly on BPL Deployment • Risk aversion • Smaller utility: Don’t have resources to risk being on “bleeding edge” of technology deployment • Larger utility: “Careful pilots, careful implementation” • Business models not proven • Questions remain about technology • Quality compared with other broadband technologies • Live up to hype? “Show me what it can do” • Scaling issues • Integration with meters a problem

17. Conclusions • Regulatory matters are not a strong driver to BPL responses • Strong drivers: • Management approach to new business opportunities and risk; CEO philosophy • Technical characteristics of BPL • Business considerations • ROI • Risk tolerance Responses are driven by individual company attitudes and business performance measures

18. The Grid of the Future: IntelliGrid

19. “A combination of hardware and software that enables two-way communication between energy service organizations and equipment within the consumers’ premises.” The Consumer Portal

20. Technical Issues • Some Remain: • Standardization • Compatibility with new classes of assets • Radiated Noise? • One Approach: • Interest Group forming to address long term technical issues • Interested? • Contact MLAUBY@epri.com

21. NARUCJOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONSBROADBAND OVER POWERLINESWalt Brown

22. NARUCJOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONSBROADBAND OVER POWERLINESSteve Houle

23. NARUC Winter MeetingTXU BPL Initiative Steve Houle Vice President Corporate Technology & Development

24. Creating The 21st Century Grid Digital protection and control Transmission superconductivity Advanced substation equipment monitoring and video security Digital fault analysis; self-healing grid Automated Meter Reading Broadband over Powerlines

25. Smart Grid Benefits - Timeline S O L U T I O N S O L U T I O N E N A B L E E N A B L E E N A B L E

26. Senate Bill 5 – Key Enabling BPL Provisions • It is in the public interest to encourage the deployment of BPL • A utility may choose to implement BPL, but is not required to do so. • Municipality shall not have jurisdiction over the BPL system, services, construction, operation, or maintenance. Texas BPL policies should provide regulatory certainty and remove barriers to entry. • No additional fees, franchises, or easements required for BPL system • BPL services to utilities are eligible expenses in rate cases • CATV pole attachment rate is just & reasonable

27. BPL Utility Services Benefits • Advanced Metering • Reduced meter reading and field service O&M • Automated disconnect (reconnect) • Outage restoration verification • Network Monitoring • Improved system operational responsiveness • Reduced reactive transformer maintenance costs • Improved outage information • Substation Automation Services • Enhanced communications and control of substations • Enables additional substation monitoring technologies • Reduced leased circuits for substation communications

28. NARUCJOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONSBROADBAND OVER POWERLINESGerald Wyse

29. BPL Deployment at Consumers Energy NARUC 2006 Winter Committee Meetings Washington, DC February 13, 2006

30. Electric Distribution System • 1,730,000 Customers • 29,768 Square mile service territory • 925 General Distribution Substations • 59,000 Miles of distribution primary lines • 545,000 Distribution transformers • 20,000+ New customers annually

31. Business Model Selection • Of all the business models being considered by utilities, the Landlord approach was chosen and a commercial market pilot approved. • Low risk approach • Leverages the core competencies of the utility • Avoids affiliate transaction issues • Can be done within the existing regulatory environment

32. General Terms of the Agreement • The Shpigler Group receives the right to provide BPL Service to two communities and will market under Lighthouse Broadband (A total of 10,000 customer passed) - 1st community – Grand Ledge - 2nd community – St. Johns • Deployment is a Market Pilot - No Investment on Consumer Energy’s part - No Commitment for further deployment - Mutual sharing of information to determine post pilot direction

33. Pilot Communities • Grand Ledge 5350 Potential customers 574 Overhead transformers 482 Pad mount transformers 6 Customer per transformer • St Johns 4950 Potential Customers 482 Overhead transformers 178 Pad mount transformers 7.5 Customers per transformer St Johns Grand Ledge

34. Consumers Energy’s Objectives • Evaluate low risk Landlord Strategy for BPL • Determine Utility Application potential • Determine implications and potential for statewide deployment • Evaluate BPL as an Economic Development tool for more competitive broadband options in Michigan communities

35. Current Status • Grand Ledge Commercial Deployment - Network up and running - Continuing with deployment • St Johns Commercial Deployment - Permit process proceeding - Meetings recently held with City Officials and 911 Personnel - 2006 Deployment

36. NARUCJOINT MEETING: ELECTRICITY AND TELECOMMUNICATIONSBROADBAND OVER POWERLINES